The High Cost of the Mommy Tax

March 01, 2001

By Christopher Farrell Open the latest issue of BusinessWeek, listen to National Public Radio, or browse new books on the economy at your local bookstore, and you'll come across frequent assertions that today's economy values knowledge and creativity. The wealth economists call it human capital -- an area that includes education, on-the-job training, skills, and individual enterprise. And its worth to the economy is some three to four times greater than the value of stocks, bonds, real estate, and other assets.

That's quite a ballast. Because of the value of human capital, University of Chicago economist Gary Becker calculated in a 1997 BusinessWeek column that the overall wealth of the U.S. economy would decline by a mere 3% if the stock market plunged by 25% and hence wiped out trillions in equity value. Human capital is that kind of a stabilizer.

If an economy's productivity, vibrancy, and prosperity largely depend on developing its human capital, where does that investment come from? Schools are important, of course. So are corporate job-training programs. Still, Becker estimates that three-quarters of all human-capital cultivation is done by parents. In today's society, that means mostly moms, especially when kids are infants and toddlers.

Now comes a new book, The Price of Motherhood: Why the Most Important Job in the World Is Still the Least Valued by Ann Crittenden, that puts the issue in a strongly economic context (see BW magazine, 3/12/01, "Being a Mother Just Doesn't Pay"). It's a very interesting prism for discussion.

SEVERE EARNINGS HIT. Pols and policymakers have been paying lip service to motherhood for years. At a cocktail party once, Lawrence Summers, formerly chief economist at the World Bank and U.S. Treasury Secretary during the Clinton Administration, told Crittenden that "raising children is the most important job in the world." He was being serious. But little did he know that the catchphrase just drives Crittenden up the wall. She had often heard the same words after leaving her job as an economic journalist at The New York Times to become a mom in the 1980s.

Sure, moms matter when it comes to creating wealth in the economy, Crittenden points out. But mom isn't paid a wage and isn't entitled to a 401(k) plan for her efforts. Her Social Security statement shows a string of zeroes for the years she spends out of the paid labor force nurturing a family. And mothers' long hours and hard work, defined as "nonwage labor," aren't included in the main economic statistics.

Many mothers, especially professionals and managers, take a severe future earnings hit when they step away from the 24/7 turbocharged workplace, even if only for a few years. "Raising children may be the most important job in the world, but you can't put it on a resume," Crittenden says.

DEEPLY TROUBLING. The Price of Motherhood is a passionate, sophisticated polemic aimed at changing the way society tangibly rewards moms. At the very least, Crittenden wants to limit the price women pay. The book is laced with stories from the experiences of other parents, research from several scholarly disciplines, and personal anecdotes (among my favorites is when someone asked her after she had left The Times, "Didn't you used to be Ann Crittenden?"). But her intellectual framework is largely drawn from a feminist and mostly female network of academics who concentrate on the economics of motherhood and the social value of child-rearing. Her underlying analysis is deeply persuasive -- and troubling.

No question, women are doing well in the workplace. Sex discrimination is disappearing fast, despite some glaring exceptions. In the knowledge economy, women now earn a majority of associate, bachelor's, and master's degrees. It's likely women's labor-force participation rate will equal men's in the coming decade. And at home, men are taking more responsibility for housework and child-rearing. Nevertheless, the care of babies and toddlers remains a female monopoly.

Motherhood carries a steep price tag, mostly in lost wages and benefits. Crittenden estimates that the "mommy tax" easily comes to more than $1 million for many college-educated women, not including other compensation, such as retirement savings. For example, Crittenden worked for some 20 years, the last eight of them at The New York Times, before leaving to raise her son. She earned some $50,000 a year at The Times, plus speaking fees, freelance income, and award money. Her annual freelance income since leaving The Times has averaged about $15,000. Just looking at lost wages alone, she figures motherhood has cost her between $600,000 and $700,000 by "conservative estimate" for the 15 years she devoted to full-time motherhood.

Divorced women with kids are especially at risk financially. Indeed, the most intriguing discussion in the book is when Crittenden details the troubling economic inequities of divorce. Even when property and other assets are split in half, the difference in future earnings between the primary breadwinner (usually the husband) and the dependent spouse with a part-time job or less demanding career (typically the wife) is wide.

LESSONS FROM SWEDEN. The real difference in the earnings of men and women comes into play when children enter the picture. Indeed, the pay gap between mothers and nonmothers under age 35 is now larger than the wage gap between young men and women, according to Crittenden.

What to do? Crittenden displays no tolerance for conservatives and their "family values" rhetoric. A committed feminist, she is deeply disappointed that mainstream feminist organizations still devalue motherhood and a woman's role in the family. "What is needed is across-the-board recognition -- in the workplace, in the family, in the law, and in social policy -- that someone has to do the necessary work of raising children and sustaining families, and that the reward for such vital work should not be professional marginalization, a loss of status, and an increased risk of poverty," she writes.

That means importing Europe's approach toward family support, especially Scandinavian practices, Crittenden says. For instance, a mother in Sweden can stay at home with an infant for a year and receive a check from the government each month worth 75% of her salary. Crittenden argues that every mother has the right to return to work at an 80% schedule until a child is 8. Fathers get an immediate 10 days off after the birth of their child and a month off at 80% pay during the year. Among the reforms Crittenden supports is a shorter workweek, more generous leave policies, family-friendly tax reform, and universal preschool for 3- and 4-year-olds.

I realize many readers will disagree with some or many of Crittenden's suggestions for public-policy and workplace reforms. It's true that she's too quick to gloss over some of the perverse effects of the European welfare state, such as high unemployment. But these are quibbles, or better yet, the starting points for ongoing discussions and debates with colleagues and friends. Crittenden has successfully used an economic scaffold to open a dialogue on how men and women look at motherhood now. It's a talk we should have as a society. Farrell is contributing economics editor for BusinessWeek. His Sound Money radio commentaries are broadcast over National Public Radio on Saturdays in nearly 200 markets nationwide. Follow his weekly Sound Money column, only on BW Online